Input vs Output VAT

output Tax

The VAT charged by a registered business on its sales.

Input Tax

The VAT paid by a registered business on its purchases and expenses.

VAT Liability Calculation

The process of totaling output tax and deducting total input tax at the end of an accounting period to determine the amount due to HMRC.

VAT Refund

Occurs when a business has reclaimed more input tax than it has collected in output tax during a period.

Zero-Rated Supplies and Input VAT

Supplies subject to 0% VAT, allowing the business to still reclaim input VAT on associated purchases and expenses.

Exempt Supplies and Input VAT

Supplies on which no VAT is charged and for which the supplier cannot reclaim any associated input VAT.

VAT Control Account Balance

A record of output tax and input tax where a credit balance usually represents a liability owed to HMRC.

Partial Exemption

A situation where a business sells both exempt and taxable supplies, requiring a calculation to determine the reclaimable percentage of input VAT.

De Minimis Limit

A threshold (e.g., £625 per month) that, if met, allows a partially exempt business to reclaim all of its input tax.

Business vs. Private Use Input VAT

The requirement to only reclaim the proportion of VAT on an expense that relates specifically to business use.

Entertainment of Non-Employees

Expenses for which a business generally cannot reclaim input VAT, unlike employee entertainment.

Commercial Vehicle Input VAT

VAT that can generally be reclaimed in full when a business purchases a vehicle for commercial use.

Leased Car Input VAT

A specific rule allowing a business to reclaim 50% of the VAT charged on car lease payments.

Fuel Scale Charge

An accounting process where a business reclaims all input VAT on fuel but pays a charge back to HMRC to account for private use.

Import VAT

VAT paid on goods brought into the UK from outside, usually at the same rate as if supplied within the UK.

Export Output VAT

VAT treatment where goods sold outside the UK are considered zero-rated and have no output VAT added.

Bad Debt Relief

The ability to reclaim VAT previously paid as output tax on a debt that has become irrecoverable and is over six months overdue.

Standard Accounting Scheme VAT Timing

A method where output tax is paid on invoices issued and input tax is reclaimed on invoices received, regardless of payment status.

Cash Accounting Scheme VAT Timing

A scheme where output tax is only accounted for when payment is received and input tax is reclaimed when the supplier is paid.

VAT Invoice Requirement

A document providing evidence for the supplier of output tax collected and for the customer of input tax paid to be reclaimed.